Mbarara Tax Compliance Hindered by Unlicensed Businesses and Poor Record-Keeping

Mbarara City Faces Tax Compliance Hurdles Due to Unlicensed Traders and Record Keeping Problems
PHOTO - Lake Mburo Park Uganda - Calls for Tax System Revamp in Mbarara City Due to Unregistered Businesses and Record-Keeping Lapses
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In Mbarara City, leaders are concerned about problems with tax compliance. They say many businesses don’t have the right licenses, and they don’t keep good records of their activities. This makes it hard for the city to collect taxes properly.

Mr. Didas Muhanguzi, the Division Town Clerk of Mbarara City South, spoke about this issue at a meeting about local taxes on September 13. He explained that the biggest problem they face is poor record-keeping by traders.

He said that because traders don’t keep proper records, it’s tough for tax assessors to figure out how much tax they should pay. For example, when the city collects taxes from local hotels, they rely on the records provided by the businesses. If there are no records, it’s a problem because they need to understand how the business works to calculate the right amount of tax. He asked business owners to keep better records so that taxes can be calculated accurately.

Mr. Muhanguzi also stressed that business owners need to register their businesses correctly and follow the right steps to get trading licenses. Many people try to avoid these steps, and this causes problems for taxpayers. He explained that to start a business, individuals must legally talk to city officials first and tell them what kind of business they want to open and where. The officials will then explain what’s needed for that specific type of business. He said this process can prevent about 90 percent of the problems.

He also clarified that just paying a fee at the bank doesn’t mean you have a trading license. Businesses need to go through the registration process, get a tax identification number (TIN), and display their trading licenses at their business places.

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Mr. Michael Gumoshabe, a merchandise business operator, said that the challenges with record-keeping come from the fact that business owners in the city have different levels of education. Some people don’t understand the importance of keeping good records, and others simply prioritize making money over record-keeping.

Gumoshabe also said that getting a trading license can be tough because many people don’t know the right procedures. This leads to unnecessary costs and efforts.

Mr. Mwijuka Simon Sezi, Chairperson of the Mbarara City Traders Association (MBACITA), acknowledged that not all traders understand the importance of record-keeping. Some are more focused on making money than keeping records. He also said that the private sector in the city is open to people with different levels of education, and they are looking at ways to help those who struggle with record-keeping.

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